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It has been a decade since the introduction of a law designed to protect whistleblowers, but the system to protect people from unfair treatment by their employers for raising the alarm on wrongdoing does not appear to be serving its purpose. Since the law lacks a provision to sanction companies that punish their whistleblowing employees by dismissing or demoting them, the victims have to take their case to court to get their situation corrected or seek damages. A panel of experts at the Consumer Affairs Agency is compiling a set of recommendations for improving the system, which reportedly includes a call for publicizing the names of businesses that defy government warnings against unlawful treatment of their whistleblowing employees. The bottom line is that the system needs to serve as an effective deterrent against wrongfully treating people for doing the right thing for their organization.

The 2006 law was crafted to protect people from reprisal for stepping forward to identify wrongdoing — even criminal acts — by their colleagues or superiors in businesses or government organizations. The measure was prompted by a series of corporate scandals that came to light through exposure by insiders, including the 2001 incident in which Snow Brand Food committed fraud by falsifying the origin of imported beef to take advantage of the government’s domestic beef buyback program following the outbreak of mad cow disease and the coverup of troubles at nuclear power plants run by Tokyo Electric Power that surfaced in 2002.

Whistleblowers are often viewed by their employers as “traitors” to the organization. They can be subjected to harassment from their superiors or demoted to idle positions where they are effectively denied chances to engage in substantial work — possibly lasting until they reach the mandatory retirement age. The law prohibits employers from giving such unfair treatment to workers for blowing the whistle, but it is essentially toothless to stop them in the absence of penalties for violators.

A worker at Tonami Transportation Co., a Toyama Prefecture-based trucking firm, was transferred to a “training facility” and was given no raises for about a quarter century after he talked to the media about the industry’s practice of bid-rigging and padding of trucking fees in the mid-1970s. He sued the company for damages and an apology in 2002. After the court awarded him compensation, he reached a settlement with the firm in 2005 — a year before he hit retirement age.

His case triggered calls for the need to protect whistleblowers. But the subsequent legislation has failed to stop similar abuses. An employee of Olympus Corp. was transferred from his sales job after he alerted the firm’s in-house section dealing with compliance problems to wrongdoing by his boss in 2007. A 2012 Supreme Court ruling that invalidated his transfer as reprisal for blowing the whistle did not improve his situation at the firm, and he had to sue the company again for damages — a case he settled in February.

To qualify for protection under the system, the 2006 law tells employees who have learned of wrongdoing inside their organization to consult their employer first. They are told to alert government agencies only when they have “substantial grounds to believe” that wrongdoing is about to be committed. They are supposed to contact the mass media or citizens’ groups only when there is a risk of the evidence of wrongdoing being covered up. It is believed the system counts on voluntary efforts by the companies to correct their own problems. In practice, many alerts raised by employees end up being silenced by the companies, which then punish the workers through unfair treatment. The law fails to stipulate any penalties for employers who treat whistleblowers unfairly. There is even criticism that the law with its tight conditions actually deters people from calling attention to wrongdoing.

Among the reported proposals by the expert panel at the Consumer Affairs Agency is the creation of a new system in which the government would urge companies found to have unfairly treated whistleblowers to correct their practices, and disclose the names of companies that defy the warnings and fail to take corrective action. That would represent some progress toward protecting whistleblowers. But such a system would need to be backed up by sufficient manpower and funding to enable the relevant government agencies to probe whether the information exposed by whistleblowers serves the public interest and whether their employers are in fact treating them unfairly. Administrative action by the agencies would need to be based on a thorough investigation so their case can stand up against possible lawsuits by the companies.

Whistleblowers who have taken their cases to court have called for introduction of criminal penalties for companies that treat their employees unfairly for exposing wrongdoings. The idea was reportedly discussed by the experts at the Consumer Affairs Agency but is not likely to be included in the report that the panel plans to compile by the end of the year. This is unfortunate, as it should be considered if the planned system of publicizing the names of violators that defy government warnings does not serve as a sufficient deterrent.

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